Thank you for the information you provided regarding Investment Industry.

We have reviewed your information and determined that the matter you have raised cannot be addressed by the Bureau at this time. The information you have provided will be recorded and entered into our database and it may be used to develop or support future enforcement activities under the laws we enforce.

The role of the Bureau is to promote and maintain fair competition and information brought to our attention by consumers and businesses is very important to our work as it contributes to the identification of marketplace issues. Due to the large number of complaints we receive each year, we are unable to resolve all of them. As a consequence, we have established criteria for the selection of cases to ensure that our decision to pursue or not pursue a particular case is exercised in an objective and consistent manner.

We consider, for example, factors such as the scope of the conduct, the number of consumers and/or businesses adversely affected, the financial loss caused by the practice, the number of complaints received and how much evidence we have. We are also faced with budgetary and human resource limitations and must concentrate our efforts in the areas where the problems are most urgent.

We invite you to visit our Web site, www.competitionbureau.gc.ca, to learn more about the work of the Competition Bureau and to access public information on case developments and general information about our programs and activities.

Thank you again for taking the time to bring this matter to our attention.

"criminal provisions of the competition act apply to the investment industry" forum topic

It is my belief that practices which are misleading and misrepresentative to the public are taking place with the knowledge and awareness of the Competition Bureau, and that perhaps this Bureau is not taking action due to the strength of the industry involved and the inherent political difficulties in tackling this issue and this industry.

Complaint #1 That misleading and misrepresenting advertising, and activity is being used to misinform Canadian investment consumers that they are dealing with a trusted investment professional, when in truth, over 80% of the time they will be found to be dealing with persons licensed as “salesperson” under the Provincial Securities Act.

Please find background information to support this complaint on the forum topic, Criminal Provisions of Competition Act apply to industry? Found again at www.investoradvocates.ca

The second complaint, which I feel to be a criminal violation of the Competition Act in Canada, is in the practice of investment firms prohibiting ethical investment salespersons from advertising “commission free” mutual fund sales to the public. I have found this to be the policy personally at two major bank owned brokerage firms, and I direct your attention to the following by way of example:

Despite an investment advisor owing a duty to care for a client seeking his or her advice, and despite that duty of care requiring the “advisor” to recommend the most “suitable” solution to the client to serve the client’s needs;

You will find it difficult to find ANY evidence in Canada of ANY investment firm ever allowing the public to be openly told (advertising is specifically banned) that commissions were in fact deregulated in 1987, and that mutual fund commissions are fully negotiable.
You will discover from industry statistics that between 60% and 90% of mutual funds sold by the industry are sold using the choice of the “highest compensation”, when equal, identical and lower cost choices are available to the consumer. These practices are illegal and are punished in the United States when they are discovered, and I write to ask this competition bureau why they are ignored here in Canada to the detriment of the consuming public?

The above two items point to a policy of “predatory pricing” in my opinion and or industry attempts to collude, gag, or prevent on environment of open competition. I feel open and free competition should be your department’s responsibility. These issues are not at this time addressable by the proper regulatory channels in the investment community due to the “self regulatory” nature and the fractured nature of this regulatory community. It may well be up to your department to act on these complaints.

I realize that this complaint has been mentioned to the competition bureau before, and that the bureau has effectively “dodged” involvement (and therefore neglected public protection) of the issue by saying it is an employee/employer issue. This is not entirely true, as agents, salesmen and advisors often have a professional agency relationship with their investment dealer, and not necessarily one of employee. Many are certainly not acting and being treated in a manner that reflects the role of an employee, but rather that of an agent or partner. Many, in fact can be found to be using professional corps to represent and promote fund sales.

In either case, should it not be within the mandate of the Competition Bureau to point out and thus protect consumers from any industry practice which may be preventing the public to be made aware of the most costly and most money saving manners in which to purchase their various investment products?

(This question speaks further to the first complaint, that of misusing (misrepresentation) the title of a trusted “advisor”, and allowing it to be used by product salespersons, effectively deceiving the public in the process)

I look forward to your renewed interest in this issue, in light of greater public awareness of white collar fraud, crime and abuse of the public, and to your timely response to these complaints on behalf of all Canadians.

Accountants, lawyers and other self-regulating professionals should consider whether their rules protect the public or just restrict competition, the Competition Bureau of Canada says.

"We understand that regulation plays a legitimate role in protecting consumers and meeting public policy goals," commissioner Sheridan Scott said in a speech on a bureau study to the Economic Club of Toronto yesterday.

"However, not all the regulations we looked at appear necessary, and removing some of these restrictions could benefit consumers and the Canadian economy."

The agency analyzed legislation, regulations, codes of practice and responses to a voluntary questionnaire sent to professional associations, colleges and boards across the country.

The study, which took a year to complete, concluded that rules set by self-regulating bodies can limit advertising, set prices and fees and restrict who can offer professional services.

Some may go beyond consumer protection, Scott said.

"These rules can lead to higher prices, limit choice and restrict access to the type of information consumers need to make decisions." For example:

Accountants and lawyers are not allowed to advertise price comparisons between themselves and competitors.

The bureau wants Ontario real estate clients to be allowed to choose some or all of the standard services offered, paying a lower price if the choice is for fewer services. Legislation doesn't currently allow that.

Canada has no national standard for assessing the qualifications of foreign-trained pharmacists. Consumers would be better served if all professionals working throughout Canada had to meet the same standards.

The Competition Bureau plans to revisit these areas in about two years to see what progress has been made, Scott told the business crowd.

"The report sends a strong signal to governments that limits that have been imposed need to be removed," said Carole Presseault of the Certified General Accountants. "That is in the process of happening."

"We have to make sure that, at the end of the day, our qualification standards are internationally recognized and internationally respected," said Kevin Dancey, chief executive of the Canadian Institute of Chartered Accountants. "If they're not, we haven't accomplished anything,"

Advertising legal services can be tricky, said Malcolm Heins, chief executive of the Law Society of Upper Canada.

"It can be pretty misleading to say I do this and so-and-so does that for this price. It's not that easy to come up with a fair advertising comparison for legal services."

A recent study by the Conference Board of Canada estimated that Canadian professionals are half as efficient as U.S. colleagues.

Who regulates professions in Ontario

Optometrists The College of Optometrists of Ontario licenses and governs optometrists Number of optometrists in Ontario: 1,315 Across Canada: 3,715

Thank you for the information you provided to the Competition Bureau concerning Investment Dealers Association .

The Bureau administers and enforces the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act. Information brought to our attention about possible contraventions under any of the four statutes is critical to helping us ensure that our Canadian marketplace is fair and competitive. We do not, however, have the authority to obtain reimbursement or to settle any contractual dispute between two or more parties on behalf of a complainant.

We have a wide range of education, compliance and enforcement tools we can use to deal with false or misleading representations and deceptive marketing practices, as well as labelling, packaging and marking contraventions.

The Bureau resolves issues brought to its attention by using a variety of means such as issuing public alerts to educate consumers about certain marketing practices. It also contacts parties directly to encourage voluntary compliance with its laws. The Bureau may also seek legal action. It refers criminal matters under any of the four statutes to the Attorney General of Canada for possible prosecution. Non-criminal matters under the Competition Act may be referred to the Competition Tribunal or other civil courts for decision.

It is important to note that the Bureau conducts its investigations in private. As a consequence, complainants will be contacted if there is a need for additional information but cannot be provided with reports on the status of their complaint. Doing so would involve shifting resources away from ongoing investigative work. We would, however, invite you to visit our Web site, to access public case developments and general information about our programs and activities.

Thank you again for taking the time to bring this matter to our attention. Your assistance is very much appreciated.

Yours truly,

Complaint and Information Specialist

The Act provides two adjudicative regimes to address misleading representations and deceptive marketing practices. Under the criminal regime, certain practices are brought before the criminal courts, requiring proof of each element of the offence "beyond a reasonable doubt." If the results of an investigation disclose evidence that, in the opinion of the Commissioner, provides the basis for a criminal prosecution, the matter is then referred to the Attorney General of Canada, who determines whether a prosecution should be undertaken. Under the civil regime, certain practices may be brought before the Competition Tribunal, the Federal Court - Trial Division or the superior court of a province and require that each element of the conduct be proven on a "balance of probabilities."

Criminal Provisions

False or misleading representations [Subsection 52(1)]: All representations, made or permitted to be made knowingly or recklessly in any form whatever, that are false or misleading in a material respect are prohibited. This general provision prohibits all misleading representations made knowingly or recklessly, not specifically prohibited elsewhere. Proof that any person was deceived or misled is not necessary in order to establish a breach of this provision.

A stockbroker trolling for clients sent out letters to boast about his company's record of investment advice.

to Jim

In addition to your observation that the RBCDS marketing letter is contrary to IDA club rule 29.7(1)(c), more significantly it would also appear to be a breach of the federal Competition Act. Good article.

74.01 (1) A person engages in reviewable conduct who, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever,

(a) makes a representation to the public that is false or misleading in a material respect;

(b) makes a representation to the public in the form of a statement, warranty or guarantee of the performance, efficacy or length of life of a product that is not based on an adequate and proper test thereof, the proof of which lies on the person making the representation; or

IDA Misrepresentations to Members and the PublicIDA By-law 20 The IDA passed By-law 20 by misrepresenting facts to its members and the public. The Ontario Securities Commission, while aware of the misrepresentations by the IDA to the public, approved the IDA by-law. IDA By-law 20PART 4 - CONTINUING JURISDICTION20.7 Former Members and Approved Persons(1) For the purposes of By-law 19 and By-law 20, any Member and any Approved Person shall remain subject to the jurisdiction of the Association for a period of five years from the date on which such Member or Approved Person ceased to be a Member or an Approved Person of the Association, subject to subsection (2).
September 02, 2004
Joint letter from:
RBC Dominion Securities 7 January 2004 Part 4 - Continuing Jurisdiction, 20.7(1) "We also question generally whether the Association has the power to regulate former Members or employees."
HSBC Securities (Canada) Inc.
Scotia Capital
TD Waterhouse

Response from IDA 27 January 2004
"The Court in Derivative Services Inc.2 affirmed the IDA's authority to investigate former members for business while a member, thus (current) By-law 20.21, which is carried through in the proposed amendments to By-law 20, would likely not be found to be ultra-vires as was the case in Chalmers. Therefore, the IDA has the necessary authority to extend its regulatory reach to impose penalties on former members/individuals in respect of conduct that arose prior to the lapse of membership or approval." page 5., para.5 2The Investment Dealers Association of Canada and Derivative Services Inc. and Malcolm Robert Bruce Kyle [I999] I.D.A.C.D. No.29

Since when did the IDA become a court of law?

Kyle letter to David Brown (OSC) and Joe Oliver (IDA) 03 June 2004
"As is clear from the citation, the determination was not made by a court but by the IDA itself." page 3., para.2

Chalmers v. Toronto Stock Exchange (C.A.) 70 O.R. (2d)532; [1989] O.J. No. 1839 06 November 1989
"It follows from what I have said that since the Act does not authorize regulation of persons who are former members or employers of same, s. 17.19(1) of the By-law is ultra vires and of no force and effect."

The IDA has misled both its members and the public.
The OSC has been complicit and refuses to address the Issue.

How protected do you feel?

IDA can’t discipline former registrants 12 February 2006

“Since the IDA has no authority to regulate former members or former approved persons either under its bylaws or in contract, it has no jurisdiction.” William F. Ready, Q.C., CommissionerSaskatchewan Financial Services Commission 06 February 2006

That certainly explains the poor regulation provided by the IDA.

Supervisor, Information CentreCompetition Bureau of Canada Dear Mr. Lafrance,Please consider this letter as a formal complaint against the Investment Dealers Association of Canada (“IDA”). I am of the opinion that their representations to the public are deceptive and in contravention of subsection 74.01(1) of the Competition Act R.S.C. 1985, c. C-34.1

(advocate comments..........Mr Kyle's correspondence above is an attempt to point out (I might be wrong and I am open to correction) to the competition bureau that this partcular self regulatory agency (IDA) has little to no statuatory standing, and it is misleading on their part as well as on the part of the industry and the OSC to lead the public into believing that they are protected, when in fact they are given very little in way of protection)

Last edited by admin on Wed Dec 12, 2007 10:12 am, edited 1 time in total.

Am I dreaming or are investment types less and less likely to call themselves "advisors" lately.

I see RBC ads on tv that suggest that a visit to thier investment "specialists" will be of help. I know they were calling the bank salesmen "investment advisors" not that long ago.

IS it possible that they are slowly, slyly making changes to get themselves into proper legal position? When 92 year old Norah Cosgrove took them to small claims court in Ontario, they got out of her case by the skin of thier teeth by claiming no duty to care for this client. If they pose as advisors, when in fact they are not registered as advisors, it would mean perhaps that someday they may not be able to win such cases with this defense.

thank you for keeping an open file and and open mind on this situation.

I spoke to a competition lawyer in Toronto today and he assured me that your department receives some 30,000 complaints per year, and that is often that a complaint is not or cannot be acted upon.

I have additional information pertaining to my complaint, specifically a notice from the IDA, (Investment Dealers Association) telling members to refrain from "title inflation" (the act of calling yourself something you are neither qualified as, or registered as).

My complaint maintains that the investment industry in Canada is in violation of this rule, this principle, or this practice more than 80% of the time, based on the evidence on the public record.

I enclose the IDA member notice within so it can be added to the file.

I submit once again that members of the public are being misled and financially abused. Specifically targetted towards seniors, it has spawned an entire new term or category of abuse in the past number of years called "financial elder abuse" by the Small Investors Protection Association, and others like The Canadian Association of Retired Persons.

This PDF notice suggests that "employees of IDA member firms may not use an "officer" title (quotes mine) that suggests he or she is registered in a capacity in which he or she is not in fact registered.
(question posed to IDA)
(why only applied to "officers" of IDA firms? Is it perhaps due to the fact that nearly "every" salesperson in Canada who works in an IDA firm, is representing themselves by a title (investment advisor) that they are not in fact registered as?
(answer below from IDA )
"MR notice 349 refers to "employees of IDA member firms" which applies to officers, salespersons and non-registered individuals."
________________________________
Wendyanne D'Silva
Director, Registrations
Investment Dealers Association
wdsilva@ida.caphone: (416) 865-3032 / fax: (416) 364-9177

(This response from the IDA director of registrations tells me that perhaps my suspicions were correct. That persons who are registered with the securities commissions as "salespersons" are using title inflation and violating this IDA rule to call themselves something they are not registered as.
This is not only illegal, which is one crime unto itself, but it is misleading to the public and portrays a bit of a "name game" by so-called professionals.

Professionals should not be pulling the wool over the eyes of the public on thier qualifications. Doctors are not allowed to get away with title inflation.

To have this ignored, or worse supported by the large, bank owned firms is in my opinion indicative of the level of greed and corruption they are guilty of.

I asked the following question at the OSC town hall, and was given the answer below. (which I am not sure answers fully how they are allowed to mislead clients............)

18. Why are investment salespeople who are officially registered as either "registered representatives", or as "salespeople", at the Securities Commission, allowed to represent themselves to the public as "investment advisors", indicating a different level of fiduciary duty to the public, when the Securities Act is clear on which titles are allowed and which are not?
The OSC registers individuals in the categories of salesperson, officer, director or partner. These categories are then further designated as trading or advising. The firm can be registered as either a mutual fund dealer, an investment dealer, or as investment counsel or portfolio manager (ICPM). The latter ICPM category is what we refer to as an adviser (spelled “er”). While advisor (spelled “or”) is widely used in the industry to represent a salesperson or representative, it is not a registration category. The OSC does not register job titles.

Before investing, investors should check the registration of anyone selling securities or offering advice with the OSC. They can do this on the OSC website, or by calling the OSC Contact Centre.

(advocate comment: (or question) If the Securities Act is clear on what is allowed or not allowed as a title, is the OSC answer just another example of them passing the buck? What am I missing?

Update October/05, after finding IDA and MFDA sending out notices to members to add clarification on this topic:

This PDF notice suggests that "employees of IDA member firms may not use an "officer" title (quotes mine) that suggests he or she is registered in a capacity in which he or she is not in fact registered.

(why only applied to "officers" of IDA firms? Is it perhaps due to the fact that nearly "every" salesperson in Canada who works in an IDA firm, is representing themselves by a title (investment advisor) that they are not in fact registered as?

To confirm, find the registration category of your own salesperson in the OSC or the IDA web site. You will find thier business card title is not the same as what they are registered as.

This info comes from a good article by Philip Porado in Sept 2005, ADVISOR's EDGE REPORT, page 6, titled NAMES PEOPLE PLAY.
(Title inflation by todays investment salespeople to (mis) represent themselves and market themselves better to trusting clients)
Well done Philip, good article, great title.

This article suggests that residents of Ontario can sue agencies for misconduct when substandard performance of important (police) duties. The ruling may have impact on various government agencies that have regulatory rules to follow, and have been accused of ignoring them in the name of convenience or other reasons.

Names that come to mind include the ASC, OSC, IDA, the Competition Bureau and I am sure others will come up over time. Any agency that has a mandate of protection of the public interest and following the rule of law, may be accused of regulatory failure if it is found that they did not follow their own process, or if they followed them arbitrarily and selectively.

This story follows a recent news item of a citizen initiative to act as watchdog over police in Ontario, when complaints are made against them. In the past the police were the ones responsible for investigating the police, and this was found to have some obvious conflicts of interest. In due time many are hoping that this same level of reason will be applied to the betterment of the investment industry reputation in Canada.

So far, members of the Securities Enforcement Coalition are saddened to say that Canada is earning a well deserved reputation for being a buyer beware game, as far as consumers are concerned, and the United States is the only player that is enforcing ethical rules. They are even the only player enforcing the rules here in Canada, while we stand by and watch our rep go down the drain.

The Bureau administers and enforces the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act. Information brought to our attention about possible contraventions under any of the four statutes is critical to helping us ensure that our Canadian marketplace is fair and competitive. We do not, however, have the authority to obtain reimbursement or to settle any contractual dispute between two or more parties on behalf of a complainant.

We have a wide range of education, compliance and enforcement tools we can use to deal with false or misleading representations and deceptive marketing practices, as well as labelling, packaging and marking contraventions.

The Bureau resolves issues brought to its attention by using a variety of means such as issuing public alerts to educate consumers about certain marketing practices. It also contacts parties directly to encourage voluntary compliance with its laws. The Bureau may also seek legal action. It refers criminal matters under any of the four statutes to the Attorney General of Canada for possible prosecution. Non-criminal matters under the Competition Act may be referred to the Competition Tribunal or other civil courts for decision

It is important to note that the Bureau conducts its investigations in private. As a consequence, complainants will be contacted if there is a need for additional information but cannot be provided with reports on the status of their complaint. Doing so would involve shifting resources away from ongoing investigative work. We would, however, invite you to visit our Web site, to access public case developments and general information about our programs and activities.

Thank you again for taking the time to bring this matter to our attention. Your assistance is very much appreciated.

THE APPLICATION OF THE COMPETITION ACT TO
MISLEADING REPRESENTATIONS AND
DECEPTIVE MARKETING PRACTICES

INFORMATION TO COMPLAINANTS

There is no legislation that provides for comprehensive regulation of all aspects of advertising in Canada. Some federal statutes provide a degree of regulation of the content and style of an advertisement either in relation to certain classes or types of products, as in the case of the Consumer Packaging and Labelling Act, the Textile Labelling Act, the Precious Metals Marking Act or the Food and Drugs Act, or in relation to specific situations, as in the case of the Broadcasting Act. In addition, some provincial legislation regulates certain marketing practices within the provinces, particularly those affecting consumer transactions. The Competition Act, however, is the only statute which has general application to misleading representations and deceptive marketing practices.

How is the law enforced?

Investigations are undertaken, pursuant to the authority vested in the Commissioner of Competition by the Competition Act (the "Act"), both as a result of complaints from the public and studies by the Commissioner's staff. It is the Commissioner's duty to commence an inquiry whenever he has reason to believe that a person has contravened a court order, grounds exist for the making such an order, or a criminal violation has been or is about to be committed.

The Act provides two adjudicative regimes to address misleading representations and deceptive marketing practices. Under the criminal regime, certain practices are brought before the criminal courts, requiring proof of each element of the offence "beyond a reasonable doubt." If the results of an investigation disclose evidence that, in the opinion of the Commissioner, provides the basis for a criminal prosecution, the matter is then referred to the Attorney General of Canada, who determines whether a prosecution should be undertaken. Under the civil regime, certain practices may be brought before the Competition Tribunal, the Federal Court - Trial Division or the superior court of a province and require that each element of the conduct be proven on a "balance of probabilities."

Not all complaints result in a prosecution or in an application to the court. The Commissioner's staff may employ a variety of instruments to promote and maintain conformity with the law. Depending on the circumstances, a temporary or permanent court order may be sought prohibiting a party from committing an offence or engaging in reviewable conduct. Alternatively, an undertaking - in essence a written promise - which will establish future conduct in respect of a particular practice, may be voluntarily given by a party under investigation. Further, a warning letter might be issued in appropriate circumstances as a last resort prior to the commencement of an inquiry. Finally, an information letter may be provided in cases where the facts demonstrate a possible contravention of the Act and the alleged wrongdoer is unaware of the relevant statutory provisions.

Due to the large volume of complaints received each year, the Commissioner has established a system for the selection of cases that best meet the objectives of the legislation. In prioritizing enforcement activity, the Commissioner reviews matters in relation to the following criteria: economic impact, the Bureau's enforcement policies and priorities, and the financial and human resources required to pursue a specific matter. These criteria have been developed to ensure that the Commissioner's discretion over enforcement matters under the Act is exercised in an objective and consistent manner.

Some of the economic considerations used in assessing the priority to be given to a complaint include: the nature and scope of the practice, its impact on consumers and competition, and the need for government intervention to restore balance in the market. The enforcement considerations include: the number and source of complaints, the potential value of a case in developing jurisprudence on particular issues, whether the practice was intentional or inadvertent, whether the matter is a national issue and the impact successful court proceedings would have on the marketplace. Finally, resource considerations include: the availability of human resources to effectively examine the complaint, availability and location of the evidence and the financial costs of gathering evidence.

Complainants should be aware that a proceeding initiated under the Act is not brought specifically to help aggrieved individuals as the Commissioner has no authority to intervene on their behalf. Rather, the activity in question is brought forward under the judicial process in order to properly address the issues it presents. An investigation in which the question of a misleading representation or a deceptive marketing practice has been raised proceeds independently of any action that may be taken by the complainant or by someone else on his/her behalf. Section 36 of the Act provides, however, that any person who has suffered loss or damage as a result of conduct contrary to the criminal provisions described below may sue for and recover an amount from the defendant equal to the loss or damage suffered. The complainant should consider carefully the costs and time involved in doing so in relation to the loss or damage suffered.

Since the Act provides that inquiries are to be conducted in private, the Commissioner cannot generally provide complainants with "progress reports" during the investigation of a particular matter. The exception is where an inquiry was begun as the result of a formal complaint by six Canadian residents pursuant to section 9, as the Act provides that such complainants, upon written request, must be informed as to the progress of the inquiry. Information on recent enforcement activities is, however, available on the Competition Bureau's web site. If you do not have access to the Internet, this information may be obtained through the Competition Bureau's Information Centre or from your local library.

Proceedings in the courts and other publicity have already brought to the attention of the business community the need for improved marketing practices. As a result, and in order to assist businesses in complying with the legislation, the Commissioner may, upon request, provide advertisers with advisory opinions applicable to proposed specific fact scenarios, advertisements or promotions.

What does the law say?

The Act contains provisions prohibiting misleading representations and deceptive marketing practices in promoting the supply or use of a product or any business interest. A description of these provisions is provided below for information purposes only and should not be taken to be a complete statement of the law.

Criminal Provisions

False or misleading representations [Subsection 52(1)]: All representations, made or permitted to be made knowingly or recklessly in any form whatever, that are false or misleading in a material respect are prohibited. This general provision prohibits all misleading representations made knowingly or recklessly, not specifically prohibited elsewhere. Proof that any person was deceived or misled is not necessary in order to establish a breach of this provision.

Deceptive telemarketing [Section 52.1]: All person- to-person telephone calls used to make false or misleading representations in promoting the supply of a product or a business interest are prohibited. Telemarketers must disclose at the beginning of each call the name of the company or person they are working for, the type of product or business interest they are promoting and the purpose of the call. Telemarketers are also required to disclose, during the call, in a fair and timely manner, the price of any product being sold and any restrictions or conditions that must be met before the product will be delivered. Telemarketers are prohibited from certain practices, including, making payment in advance a condition for receiving a prize that has been, or supposedly has been, won in a contest or game, failing to provide adequate and fair disclosure of the value of the "prizes", offering a "gift" as an inducement to buy another product, without fairly disclosing the value of the gift and offering a product at a grossly inflated price and requiring payment in advance.

Deceptive Notice of Winning a Prize [Section 53]: This provision prohibits the sending of a notice that gives the recipient the general impression he or she has won a "prize" or other benefit and asks or gives the option to pay money or incur a cost in order to obtain the prize or benefit. The provision applies to notices sent by any means, including but not limited to regular or electronic mail. No offence would arise if the recipient actually receives the prize or benefit and the person who sent the notice provides fair and adequate disclosure of the number and approximate value of prizes or benefits, the area or areas to which they have been allocated, and any fact that materially affects the chances of winning. Section 53 also requires that the person who sent the notice distribute prizes without unreasonable delay, and select participants or distribute prizes randomly or on the basis of participants' skill, in any area to which the prizes or benefits have been allocated.

Double ticketing [Section 54]: Where two or more prices are clearly shown on a product, its container or wrapper, the product must be supplied at the lower price. This provision does not actually prohibit the existence of two or more prices, but requires that the product be offered for sale at the lowest price depicted.

Multi-level marketing and pyramid selling [Sections 55 and 55.1]: An operator or participant in a multi-level marketing plan cannot make representations relating to compensation unless the representations include disclosure of compensation received by a typical participant. Further, a multi-level marketing plan which features recruitment bonuses, required purchases as a condition of entry into the plan, inventory loading or the lack of a buy-back guarantee on reasonable commercial terms constitutes a prohibited "scheme of pyramid selling".

Anyone violating the above provisions may be subject to fines of up to $200,000 and/or one year imprisonment on summary conviction, or to fines in the discretion of the court and/or imprisonment for five years on conviction upon indictment.

Civil Provisions

False or misleading representations [Paragraph 74.01(1)(a)]: All representations, in any form whatever, that are false or misleading in a material respect are prohibited. This general provision prohibits all misleading representations not specifically prohibited elsewhere.

Representations not based on adequate and proper test [Paragraph 74.01(1)(b)]: Any representation in the form of a statement, warranty or guarantee of the performance, efficacy or length of life of a product, not based on an adequate and proper test, is prohibited. The onus is on the one making the claim to prove that it is based on an adequate and proper test.

Misleading warranties and guarantees [Paragraph 74.01(1)(c)]: This provision covers any representation that purports to be a warranty or guarantee of a product, or a promise to replace, maintain or repair an article, or any part of an article. Such representations are prohibited where their form is materially misleading or where there is no reasonable prospect that the warranty, guarantee or promise will be carried out.

Misleading price representations [Subsections 74.01(2) and 74.01(3)]: These provisions prohibit any representation as to the price at which a product is ordinarily sold, unless a substantial volume of the product was sold at that price, or the product was offered for sale, in good faith, for a substantial period of time, at that price.

Untrue, misleading or unauthorized use of tests and testimonials [Section 74.02]: This provision prohibits the unauthorized use of tests and testimonials or the distortion of the results of otherwise authorized tests and testimonials.

Non-availability of advertised specials [Section 74.04]: Advertising a product at a bargain price that the advertiser does not have available for sale in reasonable quantities is prohibited. Liability will be avoided where the advertiser can establish that the non-availability of the product was due to circumstances beyond its control, the quantity of the product obtained was reasonable, or the customer was offered a rain check when supplies were exhausted.

Sale above advertised price [Section 74.05]: The supply of any product at a price higher than the price currently being advertised is prohibited. This section does not apply where the price advertised was erroneous and immediately corrected, or where the seller is not a person engaged in the business of dealing in that product.

Promotional contests [Section 74.06]: Any contest that does not disclose the number and approximate value of prizes or important information relating to the chances of winning in the contest, that does not select participants or distribute prizes on the basis of skill or on a random basis, or in which the distribution of prizes is unduly delayed, is prohibited.

Anyone who breaches the above provisions may be subject to an order prohibiting the conduct for up to ten years, requiring the issuance of a correction notice and/or imposing an administrative monetary penalty of up to $50,000 in the case of a first time occurrence by an individual and $100,000 in the case of a first time occurrence by a corporation. For subsequent orders, the penalties increase to a maximum of $100,000 in the case of an individual and $200,000 in the case of a corporation.

How to contact the Competition Bureau?

Anyone wishing to obtain additional information about the Competition Act or file a complaint under the provisions of the Act should contact the Competition Bureau's Information Centre at:

It usually brings on the legal and moral obligations of a fiduciary nature

By Glorianne Stromberg

There cannot be a financial advisor alive who is not having to deal with the changing expectations of clients and regulators regarding the provision of financial services. These expectations include a heightened emphasis on the advisory role and the need for professionalism. Given the controversy provoked by David Brown, outgoing chairman of the Ontario Securities Commission, when in a recent speech to the Toronto CFA Society he said that financial advisors are professionals with a duty to understand the products they recommend and the risks they entail, it is timely to look at what just what it means to be a “professional financial advisor.” The starting point is to remember that when you hold yourself out as providing advice, regardless of the descriptive words you use, you are representing to your clients that: > You have recognized expertise in your chosen field; > You are competent to provide the particular type of advice you are offering to your clients; > They can rely on you for such advice; and > You can be trusted to act and conduct your operations with integrity, objectivity and in the client’s best interests. This implicit representation normally gives rise to the legal as well as the moral obligations of a fiduciary, whether or not you are exercising discretionary authority. In the days when people simply called themselves mutual fund or insurance “salespeople,” the consequences of being in the advice-giving business didn’t arise. The public knew it was dealing with people whose job was to sell products and that any “advice” given was purely incidental to the sales transaction and usually didn’t create fiduciary obligations.One of the consequences of positioning yourself as a professional financial advisor rather than a salesperson is that you are exposed to being judged by standards that are applicable to professionals rather than salespeople. The common characteristics of a professional with a capital “P” include:> Successfully completing a common post-secondary educational program whose curriculum has been independently and rigorously designed to encompass independently and rigorously identified competencies and is delivered by institutions accredited to do so by an independent oversight body;> Being a member in good standing of a self-regulatory organization that sets standards of practice and conduct that are rigorously monitored and enforced, including standards that prohibit conduct and transactions in which the professional has a conflict of interest or in which the client is vulnerable to the influence of the professional;> Clearly disclosing in a written engagement agreement the services to be provided, who will provide them, what that person’s qualifications are, what reporting will be done, what form the reporting will take, how and when you will be compensated for your services and by whom, what conflicts of interest exist (if any are permitted to exist), and the like; and> Clearly disclosing to the client the amount of the fees and other compensation, including referral fees (if any), that you receive or are receivable in respect of the services you have provided.Professionals with a capital “P”, are not paid on a commission basis. They do not receive embedded compensation from third-party suppliers; they do not borrow money or receive financial assistance from clients or third-party suppliers who are hoping the “professional” will use their services or products. They do not accept incentives from such suppliers. Referral fees (if permitted at all) are strictly regulated, disclosed and flowed through to the benefit of the client, unless the client’s express consent to do otherwise has been obtained. Any deviation from these standards is looked on as being conduct that is unbecoming to the professional and exposes the professional to disciplinary action.These expectations of a professional financial advisor are reasonable ones for clients to have. The industry and the regulators need to work on making sure advisors meet these expectations. IE

I neglected to inform you that your earlier complaint was referred to the Fair Business Practices Branch (FBP) of the Competition Bureau. FBP handles complaints under both the civil and criminal false and misleading representations provisions of the Competition Act (the Act).

Due to the high volume of complaints received by FBP, the Commissioner of Competition has established a system for the selection of cases that best meet the objectives of the legislation. In prioritizing enforcement activity, the Commissioner reviews matters in relation to the following criteria: economic impact, the Bureau's enforcement policies and priorities, and the financial and human resources required to pursue a specific matter. These criteria have been developed to ensure that the Commissioner's discretion over enforcement matters under the Act is exercised in an objective and consistent manner.

Please be assured that competition law officers in FBP will proceed with investigative and/or enforcement action, if deemed appropriate, as a result of your complaint. Since the Act provides that inquiries are to be conducted in private, the Commissioner cannot generally provide complainants with progress reports during the investigation of a particular matter.

(not entirely sure, but this feels like it says, "because we are soo busy, we get to decide when to interpret the law and when not to............and the law says that we get to do this in private, without consulting anyone or informing anyone". Am I very far wrong in assuming that difficult cases against strong or powerful opponents will likely get shuffled aside?

Gerald, enclosed are copies of correspondence with Industry Canada further to the topics of interest to the Standing Senate Committee on Banking, Trade and Commerce.

I have submitted copies of this in the form of an official complaint against misrepresentation in the investment industry, or specifically RBC to use one example in the investment industry, and I presume investigation is underway at Industry Canada on protecting the public interests according to the Competition Act. However I have not heard if or how they are proceeding and wanted to add this submission to the information being reviewed by your committee.

Further to the spirit and letter of the securities act regarding an investment employee calling oneself a registration category that they may not meet…………..supposedly because it sounds better than the category that they do meet………………topic, is this misrepresentation……or …..is it illegal?

Specifically, can someone registered as a "salesperson" and who does not meet the requirements to be registered as an "advisor/adviser", call or represent themselves as an advisor?

after going through about 18 pages (out of 54) or registrants on the OSC web site, here is what I found.

There are virtually NO persons registered with RBC (to use one example) under code 945 as advisor………………..however most of these people are using the title “advisor/adviser” on their business cards. Why?

Virtually ALL of the brokers who call themselves advisor/adviser at this firm listed on this OSC web site are officially registered as code 968, “salesperson”, and further do not meet the educational requirements in the act to be registered as an advisor. How?

I find this a gross misrepresentation of the role they are delivering to the public, a violation of the spirit and the letter of the securities act, as well as a violation of the misleading advertising policies of the competition act of Canada. (they have in fact utilized and clarified the misrepresentation in their legal defense in court when push came to shove, see Norah Cosgrove V RBC, Ontario Superior Court of Justice, Small Claims Court, 03-SC-083313)

I feel they are getting away with a misrepresentation purely due to the fact that is “sounds better” to call yourself an advisor to your clients, even if you do not meet the educational requirements, and it makes it easier to sell them investment products if they think you are a professional advisor and not a commission salesperson.

To those who suggest it is possible to be “registered” as one title, and “call yourself” anything you wish I say with all due respect that they may not even be aware of what misrepresentation means.

----- Original Message -----

I recently had opportunity to ask the OSC chair, David Brown, one of the questions relating to misleading investors about investment persons titles.

Here is the question I posed and the answer received from the OSC. It is on the OSC web site inder town hall question and answers.

18. Why are investment salespeople who are officially registered as either "registered representatives", or as "salespeople", at the Securities Commission, allowed to represent themselves to the public as "investment advisors", indicating a different level of fiduciary duty to the public, when the Securities Act is clear on which titles are allowed and which are not?OSC answer The OSC registers individuals in the categories of salesperson, officer, director or partner. These categories are then further designated as trading or advising. The firm can be registered as either a mutual fund dealer, an investment dealer, or as investment counsel or portfolio manager (ICPM). The latter ICPM category is what we refer to as an adviser (spelled “er”). While advisor (spelled “or”) is widely used in the industry to represent a salesperson or representative, it is not a registration category. The OSC does not register job titles. I feel that this answer confirmed both my suspicions: (a) that the title is not being used as it is specified in the Securities Act of Canada, and (b) that the OSC is sidestepping the issue for convenience. The public deserve better than a securities regulator that cannot simply enforce the Securities Act.

I would like to add this to my initial list of complaint of misleading and misrepresenting aspects of the investment industry which I feel your organization may be charged with protecting Canadians from.

Thanks and I look forward to full due dilligence into these charges

Criminal Provisions of Competition Act and Misleading Advertising May Apply Guidelines1. In order to proceed on a criminal track both of the following criteria must be satisfied:(a) there must be clear and compelling evidence suggesting that the accused knowingly or recklessly made a false or misleading representation to the public. An example of such evidence is the continuation of a practice by the accused after complaints have been made by consumers directly to the accused; and

(b) if there is clear and compelling evidence that the accused knowingly or recklessly made a false or misleading representation to the public, and this evidence is available, the Bureau must also be satisfied that criminal prosecution would be in the public interest.2. The factors to be taken into account in making this public interest determination will vary from case to case, and may include the seriousness of the alleged offence and mitigating factors.3. The seriousness of the alleged offence will include a consideration of:(a) whether there was substantial harm to consumers or competitors which could not be adequately dealt with by available civil remedies;(b) whether the deceptive practices targeted or took unfair advantage of vulnerable groups (e.g., children and seniors);(c) whether the persons involved failed to make timely and effective attempts to remedy the adverse effects of the conduct, or whether the conduct continued after corporate officials became aware of it;(d) whether the conduct involved a failure to comply with a previous undertaking, a promised voluntary corrective action, or a prohibition order; and(e) whether the persons had engaged in similar conduct in the past.4. Mitigating factors will include a consideration of:(a) whether the consequences of a prosecution or conviction would be disproportionately harsh or oppressive; and(b) whether the company or entity has in place an effective compliance program.5. If, on balance, the Bureau is satisfied that the circumstances of the case warrant criminal prosecution, a recommendation may be made to the Attorney General of Canada who will make the ultimate determination of whether to proceed.

One issue I can think of that the investment industry should start to worry about is the issue of claiming no duty of care, nor fiduciary duty to clients when the relevant Securities Acts of Canada expressly state that a fiduciary duty is owed to clients of investment firms. (made a false or misleading representation to the public?)

Another misrepresentation is that of calling those persons legally registered under the Securities Act by a name that the securities act does not permit without further extensive qualifications. By way of example, although salespersons are only allowed to call themselves “salespersons” or, “registered representative”, they have since the market crash of 1987 begun changing the title of their business role in both advertising and business promotion materials to that of “investment advisor”. This forced the general public to fall into the misunderstanding that the large bank owned investment firms were in fact acting in the client best interest, when in fact, numerous industry statistics would indicate otherwise.

A third misrepresentation is to refuse to allow competitive pricing to be discussed publicly at the major firms. By way of example, although mutual fund commissions were deregulated and fully negotiable in about 1987, none of the advertising from any bank owned investment firm is found to have discussed or disclosed this fact. Further that there was in fact policy decisions made at firms to restrict or to disallow public advertising by any of it’s staff on the topic of deregulated mutual fund choices and methods of lowering investment costs to the public. This despite an industry promise to place the interests of the client “first”. This item should be of greater interest to those responsible for the "spirit and intent" of the competition act, lest they fall under the guise of passing the buck to avoid action......to avoid controversy.

A fourth misrepresentation would be the act of placing the vast majority of mutual fund client investments into the highest compensating commission paying choice of funds according to industry statistics. With fully 80% of all mutual fund sales having been placed into the fund class that compensated investment advisors at the highest possible amount, it would appear again that the industry promise to place, “you first”, is not being met.

I would suggest that the criminal provisions of the competition act be looked into closely to determine where they apply to these practices. They can be found at http://cb-bc.gc.ca/epic/internet/incb-b ... #partVII.1There seems to be a move afoot to uncover these issues and to force full true and plain disclosure into all things. I look forward to the increased benefit to the public interest when public inquiry is truly public, and large powerful vested interests are no longer able to silence thier stories of greed and corruption.

I will try for another time to have some serious investigation into these complaints by those responsible. If this effort is met with deferral as is often the case with controversial issues, it will be referred to the current Senate Committee on Banking Trade and Commerce, which has as one of it's mandates to judge the effectiveness of Canadian regulatory enforcement.

best regards, and looking forward to helping to assist in this important workThese are my specific complaints as you requested.

If you have a specific complain please send it to the Bureau complain centre at compbureau@cb-bc.gc.ca and it will be handled accordingly. Thank you.